Medicare’s Hospital Insurance Trust Fund is still expected to remain solvent until 2024 (the same as last year’s estimate), according to the 2012 Medicare Trustees Report released April 23, but changes to the program are necessary in order to secure its long-term future, says the Center for Medicare and Medicaid Services (CMS).
Provisions under the Affordable Care Act—including 2% cuts to provider payments starting in January— are expected to extend the life of the trust fund past its original expiration date of 2016. CMS touted the reform bill’s tools that are meant to “control costs over the long run such as changing the way Medicare pays providers to reward efficient, quality care,” going on to note that many of these reform efforts to the healthcare delivery system weren’t factored into the Trustees Report because they’ve only recently been launched.
“The Trustees Report tells us that while Medicare is stable for now, we have a lot of work ahead of us to guarantee its future,” said Acting CMS Administrator Marilyn Tavenner in a statement. “The Affordable Care Act is giving CMS the ability to do this work, with tools to lower costs, fight fraud, and change incentives so that Medicare pays for coordinated, quality care and not the number of services.”
However, the report notes that the financial outlook for Medicare is “uncertain because some provisions of current law that are designed to reduce costs may not be sustained.”
The Supplementary Medical Insurance Trust Fund (consisting of Medicare Part B and Part D) is financially balanced, with beneficiary premiums and general revenue financings set to cover expected program costs, according to report projections.
In 2011, Medicare expenditures totaled $549 billion. Spending from Medicare Part B grew at an average rate of 5.9% in the last five years, while Part D (Medicare’s prescription drug program) had an average growth rate of 7.2% in the same time period. Cost projections for Part D have decreased since the 2011 Trustees Report due to lowered spending last year and a greater expected use of generic drugs, according to CMS.
The HI Fund’s expenditures have exceeded income each year since 2008, and the report projects that this will continue to happen under the current law in all future years. This forces the use of Trust Fund interest earnings and asset redemptions to cover the difference. HI assets are projected to cover these annual deficits through 2023, and be exhausted in 2024.
Following this asset depletion, in the event that Congress doesn’t make any changes to the program, the projected HI Trust Fund revenue would only be able to cover 87% of estimated expenditures in 2024, and by 2050 would be able to cover just 67% of projected costs.
“The financial projections in this report indicate a need for additional steps to address Medicare’s remaining financial challenges. Consideration of further reforms should occur in the near future,” said the report authors. “The sooner solutions are enacted, the more flexible and gradual they can be.”
View the Medicare Trustees’ 2012 report here.
Written by Alyssa Gerace